Student loan consolidation allows you to combine multiple student loans into a single loan. You may not have given a thought to consolidating your student loans earlier, and that’s okay. Not everyone will want to choose this path. However, in some instances you should consolidate your student loans. It may be the right choice and will make things so much easier for you in the long run.
If any of the following scenarios apply to you, you may want to consider consolidating your student loans.
You Feel Overwhelmed By Your Monthly Payments
Keeping track of multiple loans, each of which has a different payment amount and a different due date, can get overwhelming very quickly. Even if you are extraordinarily well organized, chances of you missing a payment are high. If it happens just once that’s okay, but missing more than one payment can cost you. And if you fail to make the payment within 270 days, you loan goes into default. This can have several serious repercussions, from having to pay a hefty fine to a black mark on your credit history. It’s no secret that a tarnished credit history can make it more difficult for you to get approved for any loan later on in your life.
If you find yourself constantly juggling to keep track of your monthly payments, consolidate your loans. That may be the best solution for you. That way, you have to keep track of only one repayment a month. You don’t have to worry about paying a higher interest rate either. For consolidated loans, you pay the average weighted interest of all the loans that you’ve consolidated.
You Find the Unpredictability of Your Variable Rate Loans Unsettling
There are two types of student loans – those that have a fixed rate of interest and those that have a variable rate of interest. With fixed rate loans, the interest rate remains the same for the duration of the loan. However, with variable rate loans, the interest rate and the monthly payments are unpredictable as they fluctuate constantly in keeping with the prevailing market conditions. If you prefer the predictability of a fixed rate loan with steady monthly payments, consolidate your variable rate loans. It can help you switch over to a fixed rate loan.
In this case, the consolidated loan may have a slightly higher rate of interest, but that interest rate and monthly payments will remain the same throughout the life of your loan.
You Are Struggling to Make the Monthly Payments
If you find yourself struggling to meet monthly payments, consolidation is one way to lower your monthly payments. When you apply for student loan consolidation, you can get your repayment term extended. The extension automatically reduces your monthly payments. While this will help make it easier for you to make your monthly payments, the downside of extending the repayment term is that you will end up paying much more in interest by the time you finish paying off your loans.